Recovering US property market firms up growth plans for Australian homebuilder
Wednesday, 28 August 2013 12:00 AM
Having established G.J. Gardner Homes as a leading homebuilder in Australia and New Zealand with more than 82 franchisees, the company has a bold expansion plan for the US, which is being underpinned by an improving housing market.
G.J. Gardner Homes opened their first US franchise in California in 2005 and now operates 30 franchises across the US generating an annual turnover of $29.3 million (FY2012).
CEO Darren Wallis said the combination of an improving economy, low interest rates and available finance were all key factors encouraging owner-occupiers and investors back into he market.
“Based on current trends, it’s evident that the recession in the US is over. Some areas still have a way to go but others are almost booming again – it’s an exciting time to be in the property market in the US,” Mr Wallis said.
Having survived the GFC and one of the most difficult property markets the US had seen in more than a century, Wallis said G.J. Gardner Homes was now looking to capitalise on the recovery, having opened five new franchises in the January to March 2013 quarter – two each in Colorado and Utah and one in New England. In the same quarter, G.J. Gardner Homes’ US operations accounted for almost 15 per cent of the company’s total sales.
In FY2012, US operations generated an annual turnover of $29.3 million – a 25.5 per cent increase on FY2011 figures ($23.4 million). The group’s total turnover for FY2012 was $542.4 million, a $14.8 million increase on its FY2011 results (up by 2.9 per cent).
“When the GFC hit in 2008, the focus moved from expansion to supporting the existing US team to stay afloat,” Mr Wallis said
“Thanks to the support and safety net that comes with being a part of an international franchise, our US business survived the GFC and is stronger than ever, putting us in a good position to open between 500 and 700 offices over the next decade to achieve our goal of being the country’s largest residential home builder.”
Wallis credits part of G.J. Gardner’s success in the US to learning from past failures – particularly the attempted expansion in Germany and South Africa in 2006 and 2007.
“Our efforts to expand in Germany and South Africa taught us a lot of valuable lessons and are part of what makes our franchise as strong as it is today,” Mr Wallis said.
“We underestimated how challenging it would be to overcome language barriers, cultural differences and different business ethics, and ultimately we were unable to overcome these challenges and withdrew from these markets.”
Based on this experience, G.J. Gardner Homes has taken a sustainable and steady approach to its US expansion – tackling one state at a time to ensure each master franchisee is well supported and set up for success. According to Wallis, the key to successful expansion is more about finding the right person than focusing on a particular geographic location.
“It’s critical to consider factors like the political climate, economic state, competitive environment, industry-leaders, potential suppliers, legislation and cultural issues, which is why it’s so important to engage the right people with local knowledge and a strong understanding of the local community,” Mr Wallis said.
“Our approach in the US has been to first find the right person who can grow the business in their state, then provide them with ample support to set up a number of franchises in that state, making sure we get it right before turning our focus to the next state.
“It might seem like a slower method of growth but we know that providing a high level of support is the key to sustainable growth.”
The approach has paid off, with G.J. Gardner Homes as the only Australian company to have successfully started a residential property franchise in the United States market, with franchises across California, Colorado, Texas, New England, Indiana and Utah.
“American builders have warmly welcomed the franchise opportunities with G.J. Gardner Homes, recognising the benefits of being a part of a stable, supported and secure business that has a safety net of other experienced builders within reach,” Mr Wallis said.
“The G.J. Gardner Homes model is based on giving small builders the skills, resources and systems to take their building business to the next level, empowering small business owners to achieve scale and success as part of a global building group.
“I still pinch myself about the success of G.J. Gardner Homes in the US and I’m looking forward to growing the business further as we open even more franchises to leverage the post GFC property market.”